Court: Insurance Rates Can Reflect Credit Scores

Insurance companies can use a person’s credit report to determine rates, the Michigan Supreme Court said Thursday in declaring that state regulators exceeded their authority when they banned the practice as discriminatory.

The decision ends a legal battle between insurance companies and Gov. Jennifer Granholm’s administration that has reached three courts since 2005.

The industry says people with strong credit reports make fewer claims and deserve lower rates than people with weak credit reports. The Supreme Court, in a 4-3 ruling, said Michigan law allows companies to offer people with good credit lower rates.

“It is difficult to see how offering discounts to some insureds on the basis of good insurance scores is inconsistent with the (law’s) general purpose of availability and affordability of insurance for all consumers,” Justice Maura Corrigan wrote in the majority opinion.

Corrigan and fellow conservatives Stephen Markman and Robert Young Jr. were joined by Justice Elizabeth Weaver.

Insurance companies have been allowed to use credit reports for home and car rates while the dispute was tied up in the courts.

“This decision is a win for Michigan policy holders,” said Peter Kuhnmuench, director of the Insurance Institute of Michigan, which represents 39 companies. “Insurance carriers will continue to be able to offer discounts to policy holders who are less likely to have a claim.”

Democratic Party Chairman Mark Brewer signaled he would make the case a campaign issue for Young, a Republican who is seeking re-election. He didn’t, however, criticize Weaver by name. She has run as a Republican in the past but is seeking another term as an independent.

“Voters are tired of being put on the back burner so insurance companies can make a heftier profit,” Brewer said.

Chief Justice Marilyn Kelly and justices Diane Hathaway and Michael Cavanagh said they would have upheld the actions of Michigan insurance regulators.

“I would … hold that the uncertainty surrounding the accuracy of credit reports is evidence per se that a classification system based on those reports is unreasonable,” Kelly wrote.

One Comment

That is such BS!!!! I have always paid my car insurance even when laid off from my job at the cost of not paying other bills. No payment, no car insurance. I have had no claims on my vehicles. So where exactly did they get that “data”.

So now as I try to get back on my feet, still paying at least my insurance bill so I can drive my car, it will now cost me more money because my credit is suffering.

Maybe the average citizen struggling to stay alive in this horrific Michigan economy should protest by not buying insurance. I have been a customer of the same insurance company for well over 35+ years with a few towing charges and that’s it. Fat cat insurance companies are the only weiners in this situation!